Danger Close
The Trouble is Massive, Global and it all Starts in Switzerland
“If the Fed and US government continue racking up unsustainable debt and losses, this will eventually erode confidence in the US dollar. The CRE markets are already a source of trouble, and if they begin to topple the FED can’t help. The dollar's status as the world's reserve currency could be jeopardized, triggering a global financial re-ordering.”
Earlier in the year I wrote a piece containing the above quote and the alarming image below.
I followed up this warning about debt, real estate and reserve currencies with a more rigorous article that examines the sources of danger in more detail.
You can read that here:
Much has happened since these warnings in April and June.
The DJIA initially increased nearly 3,000 points from the trough in April to the crest in July. Since July 17 the Dow Jones has dropped 1,460 points including a 610 point drop yesterday that saw 1.5% of the exchange disappear.
Worldwide approximately $3T of wealth was destroyed yesterday.
I believe it never really existed.
We’ve used economic stimulus to create more money than ever before. The “plan” appeared to be:
create money
have all that money chase a small set of assets
raise the asset values via inflation
use those inflated asset values to borrow more, buy back stock and increase asset prices even further
increase insurance premiums, receive larger bank fees, capture more service provider income, etc…
That last part may have confused you.
You may say: aren’t the people paying their insurance on their more expensive assets, isn’t that increasing their costs as well?
It’s increasing costs for them and us but they are the owners of those institutions, as well.
They own insurance companies, financial institutions, management companies and consultancies.
They own central banks.
They love seeing asset values rise to nosebleed levels because their service and information-based businesses make more money.
Who’s they?
Meet Your Banker
Everyone talks about the FED but there is a global version from the home of the numbered bank account, Switzerland, that is at the heart of all this.
The Bank for International Settlements (BIS) is an international financial institution owned by central banks. Established in 1930, its headquarters are in Basel, Switzerland, with representative offices in Hong Kong and Mexico City.
The BIS “fosters global monetary and financial stability” by:
Promoting cooperation: It provides a forum for central banks to discuss policy and exchange information.
Bank of banks: It facilitates financial transactions and provides banking services to central banks.
Conducting research: It analyzes economic and financial trends and publishes reports on relevant topics.
Setting standards: It develops and promotes standards for the international financial system, often in collaboration with other international organizations.
The BIS claims that it aims to strengthen the financial system's resilience and promote sound financial practices worldwide.
I think this cabal of people has been doing more than just building fortifications around our financial system.
History of the Bank for International Settlements
The BIS was founded in 1930 in the wake of World War I.
Its initial stated purpose was to manage German reparation payments imposed by the Treaty of Versailles. However, its role soon evolved to include fostering cooperation between central banks, promoting international financial stability and making winners and losers on a global scale.
This often took the form of what we’d call information gathering (spying) and information laundering… aka pushing information (about the global order, what other central banks are up to, etc…) into central banks in different countries and using that to shape opinions and actions.
During the interwar period, the BIS was involved in various efforts to stabilize exchange rates and rebuild the international monetary system.
During World War II, the BIS's operations were significantly curtailed due to the war and the breakdown of international cooperation. It faced criticism for its dealings with Nazi Germany, although its role during the war remains a subject of historical debate.
After the war, the BIS played a crucial role in the reconstruction of the international monetary system. It helped to establish the Bretton Woods system, which pegged currencies to the US dollar and created the International Monetary Fund (IMF) and the World Bank.
The IMF and the World Bank will be the subject of deeper study in upcoming articles.
Let’s keep going down the Switzerland rabbit hole for now. In the following decades, the BIS continued to adapt to the changing global financial landscape. It promoted the liberalization of capital markets, the development of new financial instruments, and the strengthening of financial regulation.
What’s The Problem?
It's a complex issue, but there are arguments to suggest that the BIS may have indirectly contributed to the over-financialization of the globe and the creation of uncontrollable risks.
The BIS historically advocated for the liberalization of capital markets and the removal of restrictions on cross-border financial flows. While this aimed to promote efficiency and growth, it also led to a massive expansion of financial activities, including complex derivatives and securitization, which amplified systemic risks.
The BIS, like many central banks, primarily focused on maintaining price stability (low inflation) as its core mandate. This led to policies that kept interest rates low, incentivizing borrowing and fueling asset bubbles. While price stability is important, the singular focus may have neglected broader financial stability concerns. As an example, the BIS faced criticism for its role in the Greek debt crisis. It was accused of facilitating Greece's excessive borrowing by accepting Greek government bonds as collateral for loans to Greek banks, even though these bonds were considered risky. This arguably enabled Greece to accumulate unsustainable debt levels, ultimately leading to the crisis.
The BIS's Basel Accords, while aimed at strengthening bank capital requirements, have been criticized for creating a false sense of security. They may have encouraged excessive risk-taking by focusing on narrow metrics of capital adequacy while neglecting broader systemic risks, such as interconnectedness and shadow banking.
The BIS has also faced criticism for its lack of transparency and accountability. As an international organization with significant influence over the global financial system, some argue that the BIS should be more open about its decision-making processes and subject to greater public scrutiny. The BIS claims their Code of Conduct “includes restrictions on owning stocks in financial institutions or companies that could be directly affected by the BIS's decisions or policies.”
There isn’t a single equity or piece of debt on this planet that is free from the Bank for International Settlement’s decisions.
How can they control the flow of all information to central banks and claim they can’t influence their own financial future?
They control almost everything.
Have for a long time, too.
Banking, Spying and Nazis
Allen Dulles, who later became the director of the Central Intelligence Agency had a long-standing connection with the Bank for International Settlements. The Dulles family had been involved with the BIS since its inception, and Allen Dulles leveraged his contacts there for various purposes.
During World War II, the Office of Strategic Services (OSS) utilized its connection with the BIS for intelligence gathering and clandestine operations.
Several high-ranking BIS officials acted as undercover agents for the OSS, providing valuable information and facilitating secret transactions. This connection proved crucial for the OSS in navigating the complex financial landscape of wartime Europe and gathering intelligence on enemy activities.
The BIS, being a neutral international financial institution, provided a discreet channel for communication and financial transactions. This allowed the OSS to operate covertly and maintain a degree of plausible deniability.
However, with the formation of the CIA, this relationship became more formalized and structured.
The CIA recognized the BIS's unique position as a neutral international financial institution with access to a vast network of financial information and contacts. This made the BIS an invaluable asset for the CIA's intelligence gathering efforts, particularly in the financial and economic spheres.
The CIA continued to utilize the BIS as a conduit for financial transactions and intelligence gathering during the Cold War. While the exact details of this relationship remain largely classified, it's clear that the CIA leveraged its influence to maintain access to the BIS and its resources.
The BIS, in turn, benefited from its relationship with the CIA. By cooperating with the US intelligence community, the BIS could ensure its continued existence and relevance in the post-war world. It also allowed the BIS to maintain its neutrality and avoid being seen as overly-aligned with any particular country or bloc.
However, this relationship was not without its controversies. The BIS faced criticism for its complicity in Nazi financial dealings during World War II and its subsequent cooperation with the CIA during the Cold War.
After the war, the BIS faced scrutiny and calls for its liquidation due to its dealings with Nazi Germany. However, it survived, partly due to the influence of figures like Dulles who saw its potential value in the emerging Cold War.
The BIS continued to serve as a discreet channel for financial transactions and intelligence gathering during the Cold War. While the exact nature of Dulles' continued involvement is not fully documented, it's clear that his early relationship with the BIS laid the groundwork for its continued use in covert operations and financial maneuvering during the Cold War and into today.
While our FED can control conditions that drive and shape the American economy, the BIS has networks established with every central bank and the majority of financial custodians, brokerages and related institutions.
If you pair this network in Switzerland with the network emanating from The City of London you control reality essentially.
What Comes Next?
“The time to buy is when there's blood in the streets, even if the blood is your own.”
― Baron Rothschild
This quote should make you realize something wildly important.
The type of person that can make that connection can go a step further: how do I make these people bleed?
Bleeding on schedule is easily done with war. If you control the flow of information and capital it is only a matter of adding energy and shaping the build-up. We have a geopolitical map filled with conflict. The Middle East is beyond biblical already with what we have seen since last October. The black fertile soil of Ukraine, its most valuable asset, runs red again with the blood of men. For the third time in 100 years. This time with drones. China has many issues that are solved by taking Taiwan.
There are a lot of embers already aflame across the globe.
It won’t be evenly distributed of course.
Certain assets have been dislocated even further from their intrinsic worth, exposing them to more risk during a repricing event.
Then there’s Bitcoin.
The last few times we’ve done this reset there hasn’t been an asset like it.
As you study history you learn currency has been a tool to control where energy goes in the economy, and the decisions people make.
Transparency has intentionally never been a priority for those who issue and regulate money. It's easy to manipulate what isn’t seen. The central bankers, and their bosses at the BIS, prefer to operate in opacity.
Bitcoin shatters this dark dynamic with blinding light.
It offers a currency where the rules are visible, the supply is known, and ownership is indisputable. The unique combination of math and game theory at Bitcoin’s heart is area worth studying in more depth.
But what if the global bubble bursts and instead of energy moving from these sectors of the market to that sector of the market… it leaves the market entirely in favor of BTC?
They can inflate industries and currencies. Crash them. Buy the best. Gut the rest. Rinse and repeat.
Bitcoin is potentially a challenge to this dynamic, however.
Even if you are not a believer in Bitcoin, the situation described above means hard assets are going to gain value. It means purchasing power of fiat dollars is going to erode even further.
We are danger close to a major economic crash. The “final straw” could be geopolitical, it could be a chain of bank failures tied to bad CRE loans, the reemergence of a pandemic or several of these events in close order.
Given the massive overvaluation (relative to earnings) that we’ve created in the last 15-years of easy money, and then factoring the additional risks from the debt levels we see… a 40% drop in median asset prices is possible in the next 12-months.
Be prepared.
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